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REDGROUP IN
ADMINISTRATION
The news that REDgroup was placed into
voluntary receivership was big news this
month as it reflected significant pressures
in the book trade, retailing in general and
the effects of parallel import restrictions,
online sales, e-books and changing
consumer habits.
REDgroup controls a portfolio of retail
operations in Australia and New Zealand,
including Borders, Angus & Robertson
and Whitcoulls, and the newsagency
group, Supanews.
Managing Director of the Supanews
Group Adrian Gaskin said it was
business as usual for Supanews. “We
are an independent business and it is
my understanding that REDgroup is
in voluntary administration and will be
restructured,” he said.
Businesses such as Borders have been
particularly hard hit by the rise in popularity
of e-commerce sites that sell a vast range of
books online at heavily discounted prices.
The strengthening Australian dollar has also
encouraged shopping on overseas websites.
The failure of Borders in Australia is not
linked to the woes facing its namesake in
America, which is owned by a different
corporation, but both have suffered
from the rise of internet book sales and
constrained consumer spending.
One industry analyst said REDgroup’s
demise suggests Australia may have more
‘ bricks and mortar’ book shops than the
market can sustain. Others suggested the
problem lay with the management of the
company.
There may be lessons for newsagents in
the difficulties faced by book retailers, and
James Thomson from Smart Company
made the following observations for small
business:
◗ Middle ground is dangerous ground:
Borders appears to have been caught in the
middle. It wasn’t able to compete with the
big discounts on offer at department stores
like Big W and Target and it wasn’t small
enough to take on specialist inner-city
independent book stores.
◗ Bigger isn’t necessarily better: The
superstore model that Borders used in
Australia and the United States looked
like the future of retailing just 10 years ago
–
huge stores with big ranges and other
amenities such as cafes that could be a
shopping destination rather than just a
store. But big stores mean big costs – high
rent bills.
◗ Go where the customers are: Borders
worldwide appears to have been horribly
slow to realise the direction in which its
customers were moving. The company
outsourced its online store to Amazon
before 2007 and only launched its eBook
reader last year, two years after Amazon’s
Kindle, way too slow for a business that
should be perfectly positioned to spot
retail trends.
◗ Customer loyalty programs matter:
Borders Australia has been famous for
its email marketing discount program –
most weeks subscribers would receive
a page of coupons redeemable in-
store. But, incredibly, the company
only launched a formal loyalty
program in December 2010. The idea
that a major retailer – and particularly
one that appeared to have a reasonably
engaged customer base – would not
be formally gathering information on
customer preferences is unbelievable.
◗ Retail landlords need to start
looking towards the future:
The collapse raises lots of
questions for landlords.
Are big store formats (that
attract big rents) actually
viable? Which categories
will come under increasing
pressure? What rents will
be sustainable into the
future?
◗ Post-Christmas blues
can be a killer: Every
year, companies scrape
through Christmas
thanks to seasonal
sales and then hit
the post-holiday
retail slowdown.
Cashflow dries up,
bills mount and
suddenly corporate
undertakers are
on the phone.
Entrepreneurs
must plan their way
through that period;
it happens every
year.
Next month...
An in-depth look at what the
newsagency industry can learn
from REDgroup’s financial
difficulties. Is there an opportunity
for newsagents to reclaim books?
NEWS